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Gold bugs were right about price hitting US$5,000, but is their big bank conspiracy theory right too?
By Gabriel Friedman
National Post / Financial Post, Toronto
Wednesday, March 4, 2026
https://financialpost.com/commodities/mining/gold-bugs-right-price-5000-big-bank-theory
Gold bugs spent years predicting bullion would hit its present value of around US$5,000 per ounce, but now that their predictions have borne out, some are airing a long-held grievance that it should be trading even higher but for unlawful manipulation by big banks and Western governments.
Others write this off as a nonsense conspiracy theory. But with gold prices swinging wildly -- to their highest ever price in January of US$5,600 per ounce, only to crash 16% in the waning days of the month and then recover back above US$5,000 on Tuesday -- the decades-old debate about what makes the yellow metal rise or fall is rearing its head again.
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"Here's what I say," Eric Sprott, a multibillionaire in Toronto and longtime gold bug, said. "I'm going to call them 'the cartel' -- the major American banks and Canadian ones, too, by the way -- thought gold was kind of their whipping boy; that they could sell it and knock it down."
The banks, he said, manipulated gold futures, which are contracts that allow people to speculate about the gold price at a future date. Such trades can be settled in one of two ways. One is to deliver physical gold on the agreed-upon day; the other is to make a cash payment based on the difference between the contracted price of gold and the spot price on delivery day.
In practice, gold bugs say traders at the big banks figured out a way to game the system. They would short gold or bet on gold futures below the spot price. By executing this strategy at a large scale, they affected market sentiment, and eventually the large number of low-priced gold futures would drag down the spot price of gold.
In that way, the big banks made reams of money and suppressed gold prices in the process.
"It works as long as no one asks for delivery," Sprott said.
That's because if trades were primarily settled through the physical delivery of gold, traders would have to go into the market to buy large quantities of gold, which could drive up the price.
It's more than a theory, too. In 2022, a jury in a federal court in Illinois convicted two former precious metals traders at JPMorgan Chase & Co. of a years-long scheme to manipulate the prices of precious metals, including gold, through deceptive trades of futures on the Commodity Exchange Inc. and New York Mercantile Exchange Inc., both markets considered global benchmarks where the price of gold is set.
"The defendants engaged in thousands of deceptive trading sequences for gold, silver, platinum and palladium futures contracts," a United States Department of Justice press release from 2022 said.
Other traders were convicted of similar schemes by juries in Connecticut and New York, and JP Morgan agreed to pay more than US$920 million as part of a broader deferred prosecution agreement in the U.S.
In 2020 the Bank of Nova Scotia agreed to pay US$60.4 million as part of a deal to resolve U.S. criminal charges connected to a price-manipulation scheme involving precious metal futures.
There were yet more cases against big banks too, but many gold bugs believe those prosecutions hardly stopped the conspiracy.
Chris Powell, a former newspaper editor in Connecticut, said the conspiracy extended beyond gold to other precious metals and was larger in scope because the private commercial banks were also acting as agents for large central banks in the Western Hemisphere.
In 1998 he cofounded the non-profit Gold Anti-Trust Action Committee, which is devoted to investigating and exposing "collusion to control the price and supply of gold and related financial instruments."
"We have a very long documentation summary on our internet site, which includes government document after government document showing that there is indeed a Western government conspiracy to keep the price of gold down," Powell said.
But if gold price suppression has been government policy for decades, then why is gold on a bull run? That's where the gold bug's theory begins to dovetail with a more commonly held view of what drives gold prices.
Powell said gold prices are rising only because the U.S. government alienated too many of its allies in recent years, so the big-bank conspiracy idea is falling apart.
After all, the purpose of the conspiracy was to suppress the price of gold and artificially prop up fiat currencies, principally the U.S. dollar, he said.
"The reason gold is going up so far in recent years is all the countries used to be united on gold policy," he said. "Gold is the only alternative to the dollar and the central banks are no longer united on letting the U.S. rule the world."
The U.S. Federal Reserve Bank declined to comment.
In some ways Powell's ideas are not so different from some of the more mainstream views about what is driving gold prices.
For example, the World Gold Council has said central banks increased their annual purchases of gold after Russia's invasion of Ukraine in 2022.
Russia subsequently faced sanctions from a variety of countries, which were enacted by freezing its assets, many of which were denominated in U.S. dollars. Greater central bank buying of gold has largely been viewed as an effort to find an alternative to the U.S. dollar in their foreign-exchange reserves.
Pretty much all parties agree there are multiple reasons for gold's rise, including increased gold purchases by investors concerned about inflation or geopolitical risk.
Even those in the mining industry who shun the term "gold bug" agree with some of what the gold bugs are saying.
David Garofalo, chief executive of Vancouver-based Gold Royalty Corp., which helps finance precious metal mines in exchange for future revenue streams or a share of the production, said his undergraduate training in economics means he's "not religious about any metal," but he believes central banks are "debasing" fiat currencies through the excessive creation of money in order to lower the real value of their debt.
That will naturally drive investment in gold because, unlike fiat currency, there is a finite supply of gold in the world, he said. He pointed to gold's steady increase in value to US$5,000 per ounce from about US$200 in the mid-1970s.
Still, he called Sprott and Powell's idea that banks are manipulating gold futures a "conspiracy theory."
"We can agree that the gold price should be higher based on the fundamentals of monetary supply," he said.
But he wouldn't completely write off their theory of bank manipulation, saying he had never actually looked into the matter.
"It's a rabbit hole," Garofalo said.
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